Yahuza BS Viability of 0X]DUD¶DK Contract

Viability of 0X]DUD¶DK Contract on Agro-financing in Alleviating Rural Poverty in

Kano State, Nigeria

Bello Sani Yahuza

International Institute of Islamic Banking and Finance (IIIBF), Bayero University, Kano-Nigeria,
email: bsyahuza.iiibf@buk.edu.ng; bellosaani@gmail.com

Abstract. The problem of inadequate sources of financing agriculture and the scarcity of credit facilities
to rural farmers due to interest rate and lack of collateral or guarantor to secure loans lead to many lands
becoming fallow especially in dry season. This adversely affects the entire yield in the rural areas in Kano
State. This paper assesses the viability of mX]DUD¶DK in providing sources of agro-financing and
alleviating rural poverty. This study conducted in Kura LGA Kano State, adopted a quantitative survey
method, 152 samples out of 250 registered farmers were used, using random sampling, questionnaire for
data collection and chi-square test for goodness of fit for analysis. The paper finds the viability of
mX]DUD¶DK in providing sources of agro-financing very significant as it bridges the gap that exists
between the surplus and the deficit landowners where the former offers his surplus land to the latter and
employed his labor to till the land and share the yield on a pre-agreed ratio. The paper recommends the
proper implementation of PX]DUD¶DK to cultivate more lands, generate job creation, increase farmers
income earning, and enhance food security which, in turn, alleviates rural poverty.

Keywords: Agro-financing, mX]DUD¶DK, rural poverty

JEL Classifications: Q14, I39

Abstrak. Sumber pembiayaan pertanian yang tidak memadai serta kelangkaan fasilitas kredit kepada
petani pedesaan dapat terjadi karena tingkat bunga dan kurangnya jaminan atau penjamin untuk
mendapatkan pinjaman. Hal ini menyebabkan lahan menjadi terbengkalai terutama di musim kemarau.
Keadaan tersebut berdampak buruk terhadap hasil panen di daerah pedesaan di Kano. Penelitian ini
menilai kelayakan pembiayaan model muzara'ah bagi pertanian dan kelayakannya dalam mengurangi
kemiskinan pedesaan. Penelitian ini dilakukan di Kura LGA Kano State, dengan mengadopsi survey
kuantitatif, menggunakan sebanyak 152 sampel dari 250 petani terdaftar, random sampling, dan
kuesioner untuk pengumpulan data serta uji chi-square untuk goodness of fit dalam menganalisisnya.
Studi menemukan bahwa model PX]DUD¶DK layak dalam menyediakan sumber pembiayaan pertanian
serta hasilnya sangat signifikan karena menjembatani kesenjangan yang ada antara kelompok surplus
dan kelompok defisit pemilik lahan, karena kelompok surplus menawarkan kelebihan lahannya untuk
diolah serta mempekerjakan tenaga kerjanya untuk mengolah tanah dengan rasio bagi hasil yang telah
disepakati sebelumnya. Rekomendasi yang dapat diberikan adalah implementasi muzara'ah yang tepat
dan digunakan untuk mengolah lebih banyak lahan, menghasilkan lapangan kerja, meningkatkan
penghasilan pendapatan petani, dan meningkatkan keamanan pangan yang, pada gilirannya, mengurangi
kemiskinan pedesaan.

Kata kunci: PHPELD\DDQ SHUWDQLDQ PX]DUD¶DK NHPLVNLQDQ SHGHVDDQ

INTRODUCTION

Agriculture and food security go hand in hand; one cannot be achieved at the expense of the other.
They are the key derivers for alleviating rural poverty to the global community¶V FRQFHUQ with the
passage of the Millennium Development Goals (MDGs) and now the Sustainable Development Goals
(SDGs) bidding to eradicate extreme poverty and hunger by enhancing food supply at global and
regional levels. According to the World Bank (2013), agriculture alone employs 65% RI $IULFD¶V
labor force. The Global Food Security Index puts Sub-Saharan Africa (SSA) countries at the bottom
of the food security rankings (GFSI, 2015).

Nigeria, however, blessed with great natural endowments and a huge land, labour and market
potentials, the underperformance of agricultural sector due to many factors has heavily affected the
food security situation in the country. As such, land is not adequately cultivated, domestic crop
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DOI: 10.29244/jam.6.2.91-102
Received: 6 August 2018; Accepted: 14 December 2018
Yahuza BS Viability of 0X]DUD¶DK Contract

outputs are little to satisfy the teaming population in the country, food prices are hyper inflating; the
FRXQWU\¶V IRRG VRXUFHV DUH LPSRUWHG IURP WKH IRUHLJQ PDUNHW ZKLFK DGYHUVHO\ DIIHFWHG WKH FRXQWU\¶V
balance of payment at macro level at the expense of the export earnings.

Moreover, as the food imports bill grows at 11% per annum, the total annual imports bill reaches
nearly $22 billion per annum. The major setback for agricultural development in Nigeria is the
scarcity, inadequacy and inefficiency of financing resourceV WKH DQQXDO EXGJHW¶V VKDUH RI agriculture
LV DOZD\V LQDGHTXDWH WR FDWHU IRU WKH WRWDO GHPDQG RI WKH VHFWRU¶V ILQDQFLQJ UHVRXUFHV 5HFHQWO\ WKH
1.6% translated to 92 billion share of agriculture from total 6.06 trillion in the 2016 annual budget
allocation buttresses this assertion, forcing the current Minister of Agriculture to disclose it as
inadequate (Ekhege, 2016).

,URQLFDOO\ WKH WUHQG FRQWLQXHV ZLWK WKH DQQXDO EXGJHW¶V VKDUH WR WKH VHFWRU, albeit is slightly
increase to 103. Seven billion from the total 7.441 trillion also adds to the inadequacy of the
financing resources (Agronigeria, 2017). The release and utilization of the fund is untimely and in
most cases unachievable, as such most of the Federal Government policies on agriculture have had
limited impact and food security has not been achieved and poverty, hunger and unemployment
increased as general economic performance of the GDP registers negatively in the 3 rd quarter of 2016
to -2.24 (Ministry of Budget and National Planning, 2016).

&RQVHTXHQWO\ WKH FXUUHQW SHUIRUPDQFH RI WKH DJULFXOWXUDO VHFWRU¶V FRQWULEXWLRQ WR WKH RYHUDOO *'3 LQ
the 3rd quarter of 2016 was 28.65% which is a strong indication that the country is already in food and
economic crisis and Nigeria is now among the 39 Low-Income-Food-Deficit Countries (LIFDCs)
(FAO, 2018). Thus, the incumbent government focuses its economic recovery and growth at
diversifying the mono-oil-economy, which crashed in the global market and sets agriculture to be one
of the key derivers of its economic policies. But the shift from subsistent to commercial agriculture
UHTXLUHV IXQGLQJ DV WKH ILQDQFLDO LQVWLWXWLRQ¶V OHQGLQJ WR DJULFXOWXUH UHPDLQV DV ORZ DV LQ PDQ\
parts of Africa (Ruete, 2015).

Agriculture is essential for Sub-6DKDUDQ $IULFD¶V JURZWK DQG IRU DFKLHYLQJ Sustainable Development
Goals with the passage Millennium Development Goals of halving poverty by 2015. Agriculture
alone employs 65% RI $IULFD¶V ODERU IRUce (World Bank, 2013) being the largest labour employer,
provider of raw materials to industries and boosting export and exchange rate earnings are just some
incentives of the sector (Eze et al., 2010; Agbaeze & Onwuka, 2013).

Likewise in Nigeria, where the agricultural sector as the most important non-oil economic activity
employs 70% of labor forces and contributes 40.07% of GDP (NBS, 2010). The sector up to the
1960s was the main pillar of the Nigerian economy providing enough food to the citizens and at the
same time export the surplus food items to the foreign market, for instance; the famous groundnut
pyramids in the Kano in the North, cocoa in the west, oil palm and kernel heaps in the East, and the
rubber plantation in the Mid-west asserts the notion (Adebayo & Ojo, 2012).

However, the sector was eventually neglected due to oil discovery and subsequently the country
became one of the major food importers, to buttress the assertion Nigeria never meet the 10%
minimum annual budget requirement to agriculture as recommended by 2003 Maputo Declaration, the
highest was 7% in 2008. Thus, the greatest challenge to agriculture in Nigeria, no doubt, has been
inadequate funding (Okoro & Ujah, 2009; Agbaeze & Onwuka, 2013).

Nevertheless, the problem of inadequate funding through low budget allocation to the agriculture by
the successive regimes of the Nigerian government resulted into many problems such as: inadequate
funds for credits and inputs supply to rural farmers, and lack of storage facilities to manage post-
harvest loss. Perhaps, some agricultural policies were launched by the Nigerian government since
1950s to date such as the Agricultural Development Programme (ADP-1975), Operation Feed the
Nation (OFN-1976), the Green Revolution (1980) FADAMA I, II and III, the Agricultural Credit

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Yahuza BS Viability of 0X]DUD¶DK Contract

Guarantee Scheme Fund and so on (Adetiloye, 2012) aimed at providing adequate financing
resources, but only the contrary was achieved. As such, the low crop yield is not enough for the rural
farmers to meet their annual demand of food consumption let alone provide the surplus to the market.

In fact, this problem proves the strong nexus between agricultural financing and achieving food
security in alleviating rural poverty which, is defined by Adeleke (2012) as a situation where
individual or a community cannot afford the basic necessities of life such as food, clothing and
shelter. Poverty causes hunger and vice-versa (FAO, 2008). Statistically, RI WKH ZRUOG¶V SRRUHVW
people live in rural areas, RI WKH ZRUOG¶V XQGHUQRXULVKHG SHRSOH OLYH LQ WKH GHYHORSLQJ FRXQWULHV
and 42.3% of the poor Sub-Saharan Africans (SSA) lives on less than $1.90 a day including Nigeria
(World Hunger and Poverty Facts, 2018; The Hunger Program, 2018). Although, about 75% of the
working population in Kano State was committed to agriculture (Kano State, 2013), but 73.11% of its
total population are poor and food insecure (NBS, 2013) and about 73% of its households are living
below $1.25 a day which, reflects the severity of poverty especially in the rural areas in the state. The
crop output is insufficient to the level of consumption as a result of low income earning by the
farming households (Ifeoma & Agwu, 2014).

According to Makarfi and Olukosi (2012) and Ejike (2012), the difficulty of rural farmers to access
formal loans due to interest rate, lack of collateral, guarantor, high cost of loan application and so on
forced the farmers to resort to informal source of financing ranging from personal income, borrowing
from friends, relatives, money lenders, farmers cooperatives, self-help groups and equity, which is
insufficient and cannot meet the demand of commercial agricultural financing. Majority of farmers in
Kano State especially in rural areas is subsistent (Makarfi & Olukosi, 2012) and most of the farming
system is rain-fed but irrigated farming is also practiced, and rice was identified as the main staple
food of its populace (Inuwa et al., 2011). Therefore, accelerated agricultural and rural development
would contribute to greater efficiency, increase household income, improve standards of living, and
reduce poverty (Nyagba, 2009).

Whereas, mX]DUD¶DK is defined as sharecropping partnership or joint act of farming. Technically,

mX]DUDµDK (share-cropping) is a type of agricultural partnership contract where the contracting parties
agreed to contribute between the factors of farming production and share the yield on a pre-agreed
ratio after harvest (Yaacob, 2013). The great potentials of muzarD¶DK contract in terms of providing
financing opportunities to rural farmers are very important, where landowners provide their lands to
landless farmers and employ their labor to cultivate it, which help in cultivating more lands and, in
turn, alleviate rural poverty in Kano State.

Consequently, empirical studies prove the practice of PX]DUD¶DK as beneficial in countries like:
Malaysia, Indonesia, Egypt, Yemen, Sudan, Pakistan et cetera, particularly in rice farming, either by
governments in their policy to enhance food security or by commercial institutions and other
corporate bodies, the practice proved successful in alleviating poverty, promoting food security,
achieving economic well-being of farming society, social brotherhood, and justice (Khasanah et al.,
2013). This objective of food security and social wellbeing is articulated by the Quran Al-Balad
verses 14-16, thus: ³«Or providing food in a day of hunger (famine), to an orphan near of kin, or to
a Miskin (poor) cleaving to dust (out of misery)´.

Therefore, the paper underscores the viability and potentials of PX]DUD¶DK (sharecropping) mode of
agricultural financing in alleviating rural poverty and providing food security by facilitating financing
opportunities to the rural farmers in Kano State and Nigeria in general, thus the findings of the paper
would provide positive solution to the policy makers, public and private institutions.

Research Objectives
The broad objective of the paper is to assess the viability of PX]DUD¶DK on agro-financing in
alleviating rural poverty in Kano State. Other specific objectives are to:

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Yahuza BS Viability of 0X]DUD¶DK Contract

1 Assess the viability of PX]DUD¶DK contract in providing alternative source of financing agriculture
in Kano state;
2 Determine the potentials of PX]DUD¶DK contract in alleviating rural poverty in Kano State.

Research Hypothesis
H0: 0X]DUD¶DK contract does not have significant potentials towards providing source of agro-
financing and alleviating rural poverty in Kano State.

LITERATURE REVIEW

Conceptual and Theoretical Clarifications

0X]DUD¶DK has been defined by different classical jurists such as: 4XUDIL ³G $+´
Ibn Manzur (d. 711AH/1311CE), Hakimi (2011), Fiqh Encyclopedia (1997 CE/1418 AH) and
Sharbisi (1401/1981). Literally, mX]DUD¶DK is an Arabic word which denotes partnership on farming
or joint act of planting. Technically, to the Hanafis, mX]DUD¶DK is a contractual agreement on farming
against a pre-agreed share from the crop outputs. To Malikis, it is a joint partnership on crops
(Dusuqi, V. 3 p. 372; Zuhaili, 1985); to the 6KDIL¶LV it is an agricultural work on land for a share from
the outputs with the seeds from the landowner (Fiqh Encyclopedia, 1997), whereas to the Hambalis,
PX]DUD¶DK is a provision of land to a peasant to work on it to share a specified known portion from
the output produce (Ibn Qudamah, 541-620 A.H, 1997).

In general, PX]DUD¶DK known as a sharecropping contract is an agreement between two parties in

which one agrees to allow a portion of his land to be used by the other in return for a part of the
produce of the land (Yaacob, 2013). Sharecropping contract has been applied to finance agriculture
where the landlord provides the land and the tenant provides the other inputs (seeds, labor, fertilizers,
etc.). The landlord receives a share in the crop for the provision of land and so the labor for his work.
In extreme cases, such as when the crop is lost, the landlord will forgo his expected returns, but he
will not lose his capital because the land is not destroyed or lost physically (Nienhaus, 2010).

However, mX]DUD¶DK contract may be in two-party, three-party forms or above (Dusuqi, n.d., p. 372
and Ibn Qudamah 1997, p. 581 and Kasani, 1968, p. 3808 in Hakimi, 2012). 0X]DUD¶DK is legally
valid contract proved by Sunnah1 ,MPD¶ DQG Qiyas and accepted by all the scholars except Abu
Hanifah and Zufar bn Hudhayl (110-158AH). 0X]DUD¶DK complements the legal maxims of
promoting public interest (maslahah), removal of difficulties, social brotherhood, equity, and
participation.

Conditions and Termination of 0X]DUD¶DK Contract

0X]DUD¶DK contract should meet certain rules and regulations before it could be considered a legally
valid contract. Scholars of fiqh, such as Maliki, Hambali, Hanafi, etc., summarized those conditions
as: (1) competency of the parties to PX]DUD¶DK contract, 2) offer and acceptance must be clearly
expressed and agreed upon by the parties, 3) providing land to the farmer, 4) fertility and freeing the
land rent paid from the land produce, 5) sharing of the output, 6) specification of period of PX]DUD¶DK,
7) sSHFLILFDWLRQ RI HDFK SDUW\¶V VKDUH DQG MXVWLILFDWLRQ EDVHG RQ WKH HTXLW\ VKDUH RI WKH SDUWLHV, 8)
specification of the type of the seeds and, 9) Specification of who is to provide seeds (Al-Aini,
1990CE/1411AH) (Kasani 1968: 3822 in Hakimi, 2012).

1
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household from the emigrants (Muhajirun) in Medina, save they are practicing PX]DUD¶DK on 1/3 and ¼, and Ali
(RA) did PX]DUD¶DK DOVR 6D¶DG EQ 0DOLN $EGXOODKL EQ 0DV¶XG 8PDU EQ $EGXO¶D]L] 4DVLP 8UZDW WKH
IDPLOLHV¶ RI $EXEDNDU 5$ 8PDU 5$ $OL 5$ DQG ,EQ 6LULQ DOO KDYH EHHQ SUDFWLFLQJ PX]DUD¶DK contract.
Abdul-Rahman bn al-Aswad said: I used to partner Abdul-Rahman bn Yazid in sharecropping. Also Umar (RA)
used to partner peasants on condition that, if Umar provide the seeds he will get ½ share from the yield, but if
they provide the seeds they get so and so.

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Yahuza BS Viability of 0X]DUD¶DK Contract

However, the contract could automatically be terminated when the period is completed, otherwise it
could be ended by expressing word of termination by either party, or by action, e.g. when the farmer
died or denied access to the land (Zuhaili 1985: 626±627). Also PX]DUD¶DK is terminated when the
landowner run into bankruptcy that necessitates the land to be liquidated or when the farmer refuses to
work in the land provided that will not incurred any loss to the landowner.

Agricultural Financing
However, agriculture according to Ken (2006 as cited in Yusoff, 2013) by narrow definition means
farming, and by broad definition, it is an activity which relates to the production process of human
needs, which originated from plants or animals, accompanied by efforts of renew, reproduce and
reconsider economic factor. Agricultural financing is defined as the economic study of acquisition and
use of capital in agriculture that deals with the supply of and demand for funds in the agricultural
sector of the economy. Whereas, Famogbiele (2013) stated that agricultural finance is all about the
acquisition and utilization of capital with the factor of production that facilitates the acquisition,
procurement and management of the other factors of production namely, land, labour, capital, and
entrepreneur to improve social welfare through development of agricultural sector for rural
development, income equality, and local empowerment in a form of equity, gift, or loan.

Obansa and Madueke (2013) cites scholars like Antonio and Agnes (1994), Mody (1981), Rao (1978),
and Narayan (1994) arguing that developing countries (Nigeria inclusive) are in dire need of long-
term mode of agricultural financing, as a stage of their respective economic development. Different
types of agricultural financing, such as rural financing, value chain agricultural financing,
microfinance agricultural financing, etc. all are of equal importance to rural development and rural
poverty eradication.

Rural Poverty
The common manifestation of rural community is poverty. In fact one cannot separate poverty with
rural people. Hence rural poverty becomes a popular concept among the scholars which is ever
increasing. The statistics says that RI WKH ZRUOG¶V SRRUHVW SHRSOH OLYH LQ UXUDO DUHDV RI WKH
ZRUOG¶V XQGHUQRXULVKHG SHRSOH OLYH LQ WKH GHYHORSLQJ FRXQWULHV DQG RI WKH SRRU 6XE-Saharan
Africans (SSA) lives on less than $1.90 a day including Nigeria (World Hunger and Poverty Facts,
2018; The Hunger Program, 2018). Nigeria with all her abundant natural, material, and human
resources is classified among the top 25 poorest nations with about 70% almost 2/3 of her citizens
under poverty line (Adeleke, 2012). Also, Ajulor (2013) and Egwemi and Odo (2013) state that,
studies have shown that majority of Nigerians live in the rural areas and are deprived of basic
facilities. While the statistics vary in terms of the actual number of people in the rural areas; 70%
(Aderonmu, 2010); 75% (Abubakar, 2009); 73% (Dauda & Aderonmu, 2010); 73% (Presidential
Report, 1999) are however, in agreement to the extent that most Nigerians live in the rural areas and
majority of them are poor and subsistent farmers.

Adding to that are: lack of infrastructure such as roads, telecommunication facilities and postal
services, lack of constant power and water supply, storage facilities, farm mechanization and
technological advancement, lack of convenient and conducive atmosphere for learning, poor health
care centers and facilities, scarcity of access to land and sources of financing, widening rural-urban
income gap which resulted in rural-urban drift, large family size and so on, that is why poverty and
rural existence are two faces of a single coin thus, any attempt to tackle the menace of poverty in
Nigeria must focus on the rural areas. To sum it up, the root problem of inadequate access to food is
poverty (Yakubu & Aderonmu, 2010; Ajulor, 2013; Egwemi & Odo, 2013).

However, poverty may be absolute, relative, or subjective poverty. Absolute or subsistent poverty
refers to a situation where there is a lack of basic necessities of life such as: food, clothing and shelter,
relative poverty refers to person whose resources are low in relation to another person, meaning he is

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considered poor only in relation or comparison to other person, and the subjective poverty which is
defined as a minimum income earning which people consider necessary to make ends fulfilled for
household. Subjective poverty exists when the OHYHO RI RQH¶V LQFRPH IDLOHG WR PHHW RQH¶V Qeeds,
therefore, before concluding one is subjectively poor factors like family size, age, education,
occupation, gender, religion and so on must be taken into cognizance (Egwemi & Odo, 2013).

Rural Development
The concept and definition of rural development vary among the scholars. While some scholars
defined it signifying sustainability of utilizing resources, some signify political process through
democracy, justice and equity of rural populace and gender sensitivity; others signify economic
development by improving standard of rural population, agricultural development, employment
generation and infrastructure. Egwemi and Odo (2013) outline five definitions on rural development:
$GHJER\H VHHV UXUDO GHYHORSPHQW DV ³WKH GHYHORSment of rural people in such
a continuous manner as to enable them to most effectively and efficiently utilize their
intellect, technology and other resources for further development of themselves and
RWKHUV´ 6LPLODUO\ WKH VRXWK $IULFDQ 5XUDO 'HYHORSPHQW Framework (SARDF,
GHILQHV UXUDO GHYHORSPHQW DV ³KHOSLQJ UXUDO SHRSOH VHW WKH SULRULWLHV LQ WKHLU
own communities through effective and democratic bodies by providing the local
capacity, investment in basic infrastructure and social services, justice, equity and
security, dealing with the injustices of the past and ensuring safety and security of the
UXUDO SRSXODWLRQ HVSHFLDOO\ WKDW RI ZRPHQ´ 7R 'LHMRPDRK UXUDO
GHYHORSPHQW LV ³D SURFHVV RI QRW RQO\ LQFUHDVLQJ WKH OHYHO RI SHU FDSLWD LQFome in the
UXUDO DUHDV EXW DOVR WKH VWDQGDUG RI OLYLQJ RI WKH UXUDO SRSXODWLRQ´ :KHUHDV *DQD
YLHZV UXUDO GHYHORSPHQW DV ³WKH UH-structuring of the rural economy so as to
lift it from being a dependent peasant and largely agricultural to one economy capable
of sustaining the quality of life. It is a process of bringing improved level of living to
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$NLQERGH FRQFHLYHV UXUDO GHYHORSPHQW DV ³LQYROYLQJ D VSHFWUXm of issues
among, which are the problems of agricultural mechanization, job creation, transport
GHYHORSPHQW DQG SURYLVLRQ RI DGHTXDWH KRXVLQJ DQG VKHOWHU IRU WKH UXUDO GZHOOHUV´

However, the central point to consider in all the above definitions is that rural development is about
enhancing and improving the socio-economic living standard of the rural population through
agricultural transformation plans. The great potentials of the rural areas are very vital to the socio-
economic development in the sense that it provides agricultural products, food stuffs, labor
employment, mineral resources and raw-materials for internal and external industries. These are
indeed very crucial to the attainment of poverty alleviation, sharing economic growth and sustainable
development to individuals, household and the country as a whole. It is pertinent to know that rural
population comprises local farmers, laborers, tenants and sharecroppers thus; the paper argues that
rural development is a veritable vehicle of poverty eradication in Nigeria (Egwemi & Odo, 2013).
Experience from the developed economies has shown that a sound rural development policy must
possess these three key fundamental elements, viz: must be sustainable, efficient, and affordable
(Nyagba, 2009).

Empirical Framework
Rahman and Othman (2012) conducted their work in Selangor State, Malaysia, the study identifies the
people of Malaysia as 6KDIL¶L Mazhab adherents who practice PX]DUD¶DK sharecropping and pay
zakah tithe. They share seeds, fertilizers, pesticides, transport, and labor costs by adopting Hanafi
views. They rent land at the rate between RM100 to RM900 per acre, which in Nigeria is N25,000 per
acre. Rahman and Othman (2012) also explain that Fatima (1983), suggests that, in sharecropping
known as Pawah in Malay language, farmers get 1/2 ratio or 2/3 ratio. While Fatima (2004), on the
other hand found out in Kelantan that farmers rent out land for paddy cultivation at RM 53.00 per
acre.
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Another is work by Yaacob (2013) on commercializing PX]DUD¶DK model between Malaysian

government and Orang Asli people. The study proposes the Malaysian government to provide access
to land to the Malaysian aborigines to cultivate and share the yield between government and them.
The study concludes the findings as: 1) mX]DUD¶DK model assists both government and the aborigines,
2) the model instilled a humanistic sense in Malaysian government policy. Giving compensation will
merely works in short term. Apart from compensation, their skills need to be instilled for long term
survival, and 3) the model also suggests that government is a caring institution and consequently
evading all negative accusation on the treatment of Orang Asli.

Meanwhile in Sudan, the Sudanese Islamic Bank (SIB) adopted PX]DUD¶DK financing partnership in
three different farming patterns, namely: canal irrigation, pump irrigation, and rain-fed, the Bank
provides fixed assets, such as tractors, ploughs, harrows, water pumps, and inputs e.g. seeds,
fertilizers, pesticides, fuel, jute sacks and co-management, marketing, storing, and extension. The
farmer on the other hand contributes with his land, labor and management. From the net profit the
farmer gets 30% for management. The remaining profit (70%) is divided between the Bank and the
farmer according to their equity share (Al-Harran, 1990).

Similar studies were conducted in Pakistan by Hassan et al. (2012) and Tahir (1996). The former¶V is
titled; Role of Islamic Banking in Agriculture Development in Bahawalpur, Pakistan. Using standard
deviation, variance, and Chi-square tests, the study concludes that PX]DUD¶DK among the range of
Islamic banking products, should be used WR DGGUHVV WKH IDUPHUV¶ FUHGLWV FRQVWUDLQWV in the region. The
latter¶V propoVHV VKDUL¶DK FRPSOLDQW PX]DUD¶DK as a relevant mechanism to replace the exploitation-
based and riba-associated land-tenancy among landowners and tenants.

More so, Hakimi, (2011) conducted his own in Egypt on the theory of PX]DUD¶DK and musaqah and
their contemporary application in Tanta agricultural district. 7KH FRQWHPSRUDU\ VFKRODUV¶ and
SUDFWLWLRQHUV¶ YLHZV LQ $]KDU DQG Cairo universities and Faisal Bank Library and Saleh Kamel Islamic
Economics Research Centre were analysed. The study concludes that both PX]DUD¶DK and musaqah
are suitable mechanisms in agricultural investment as they stand to help both parties as well as its
immense role in reactivation of an idle land as they help in cultivating more land.

Meanwhile, a research work conducted by Khasanah et al., (2013) in Indonesia finds that the profit
and loss sharing (PLS) practice covers partnership as a work basis, the priority of equity capital, the
one-third share and one-half share models which is based on equality, prosperity, mutual cooperation,
and WD¶DZXQ (mutual assistance). On the whole, the practice proves immensely successful and
beneficial to government, private sector and individuals including the rural farmers.

METHOD

Overview of The Study Area

Kano State represents the entire population under study. Kano was one of the original seven Hausa
Kingdoms; the city was founded around the 6th century C.E. and located in the North Western Region
of Nigeria. The modern Kano State was created on May 27, 1967 from part of the Northern Region
and became the largest city in Nigeria as at 2006 census with population of 9,383,682, estimated
populations reached 12 million in 2013. The State bordered with Katsina State to the north-west,
Jigawa State to the north-east, Bauchi State to the south-east, and Kaduna State to the south-west. The
length of the state is more than 18,684 square kilometers (7,214 sq mi) or more than three million
hectares of cultivable land and is the most extensively irrigated state in the country and the second
largest state in terms of commercial activity. The English and Hausa were the two official and local
languages spoken respectively in the State. It has 44 local government areas and 483 wards (Kano
State, 2013).

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Yahuza BS Viability of 0X]DUD¶DK Contract

The State FRQWULEXWHV RYHU RI 1LJHULD¶V QRQ-oil export revenue. Agriculture is one of the most
LPSRUWDQW SLOODUV RI WKH 6WDWH¶V HFRQRP\ ZLWK DERXW RI WKH WRWDO ZRUNLQJ SRSXODWLRQ HQJDJHG
directly or indirectly in it. The principal food crops cultivated in the state are millet, cowpeas,
sorghum, maize, and rice. Also groundnuts, wheat, cotton, sesame, soya beans, cotton, garlic, gum
Arabic, and chilli pepper are produced for consumption, export and industrial purposes. Most of these
commodities are available at the famous Dawanau Market about 13 kilometers from the Kano City
(Kano State, 2013).

Furthermore, the state has three agricultural zones, namely: Rano zone one, Dambatta zone two and
Gaya zone three. The Rano zone, the largest rice producing zone has 14 local government areas:
Rano, Kura, Garun Malam, Tudun Wada, Kumbotso, Bunkure, Bebeji, Kiru, Doguwa, Kibiya,
Madobi, Rogo, Karaye, and Gwarzo local government areas.

Materials and Methods

The paper employed an exploratory quantitative survey design. Kano State farmers are the population
of study from which Kura Local Government Area is the focus of the research. A multi-stage random
sampling technique was used to select 152 samples of the registered farmers. The procedure started at
primary level by selecting Rano Agricultural Zone I from the three agricultural zones in the State. The
researcher was formally introduced to the Area Programme Coordinators (APCs) in the study area.
The researcher with the help of four research assistants administered the instrument to the respondents
and allowed an interval of three to seven (3 - 7) days for retrieval. Three of the research assistants
(APCs) are agricultural staff working under the Rano Zone and the other one is a local farmer. The
researcher successfully retrieved 364 questionnaires out of the 380 distributed questionnaires issued to
the target respondents and the relevant information was collected.

0X]DUD¶DK Agricultural Financing Scale (MAFS) was the structured questionnaire used for collecting
primary data from the target respondents in Kura Local government area from the total sample size of
250 farmers. Furthermore, Chi square test of goodness of fit was adopted for data analysis and
justified in line with the previous researchers, such as Hassan et al. (2012).

RESULTS AND DISCUSSIONS

The paper through the presentation of data and discussion of the results aimed at exploring the
viability of mX]DUD¶DK (sharecropping) contract on agro-financing to alleviate rural poverty in Kano
State,Tthe discussion of the data is as follows:
H0: 0X]DUD¶DK contract does not have potentials towards providing source of finance and alleviating
rural poverty in Kano State.

7DEOH EHORZ VKRZV IDUPHUV¶ UHVSRQVHV RQ HDFK LWHP 7R WHVW WKH null hypothesis, six itemized
potentialities of PX]DUD¶DK contract were identified by the respondents in the study area. The p-value
(0.002) is less than the level of significance (0.002 < 0.05) at 5 degrees of freedom which shows a
significant difference with respect to the six items. This implies that some potentialities are
significantly more important than the others. An observation of the data reveals that items (2), (3), and
(5) are significantly more viable than others in terms of providing source of finance and alleviating
rural poverty.

Table 2 shows responses about major challenges of farming system in the study area as identified by
the respondents to test the null hypothesis. The p-value (0.00) at 5 degrees of freedom is less than the
level of significance (0.00 < 0.05) which shows a significant difference with respect to the five items.
Therefore, an observation of the data reveals significant difference among the five items which
inferred that some challenges are more significant than others. Item (1) which is inadequate sources of
financing is more severe than the rest, followed by item (4) land tenure and item (3) scarcity of inputs
respectively.

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Yahuza BS Viability of 0X]DUD¶DK Contract

Table 1 Chi-square test of goodness of fit showing the most dominant potentials of mX]DUD¶DK
contract towards providing source of financing agriculture and alleviating poverty in the
study area as identified by the respondents
S/No Observations Observed N
1 Encourages more uncultivable land to be cultivated by providing more 55
access to surplus land
2 Provides more sources to agro-financing 73
3 Creates job opportunities, reduces unemployment rate, enhances economic 73
full employment, and achieve macroeconomic growth and development
4 Promotes social solidarity, brotherhood, mutual cooperation, and 55
participation
5 Enhances food security by reducing hunger and alleviating rural poverty 73
6 Enhances payment of zakah 36
Total 365
Source: Primary data
Note: P-value = 0.00; Degrees of freedom = 5; Level of significance = 0.05 (5%)

Table 2 Chi square test of goodness of fit showing the major challenges of farming system
S/No Major Challenges Observed N
1 Inadequate sources on Agro-financing 164
2 Land tenure system 91
3 Scarcity of inputs 73
4 Lack of party to share the land 25
5 Self food secured 11
Total 364
Source: Primary data
Note: P-value = 0.00; Degree of freedom = 4; Level of significance = 0.05 (5%)

7DEOH EHORZ VKRZV IDUPHUV¶ UHVSRQVHV RQ HDFK LWHP In addition to the below, data analysis six
itemized solutions were further identified by the respondents to test the null hypothesis. The p-value
(0.00) is less than the level of significance (0.05) at 5 degrees of freedom (0.00 < 0.05) which shows a
significant difference with respect to the six items. This implies that some solutions are more effective
than the rest in achieving these potentials. An observation of the data reveals that item (5) is
significantly more important than the rest followed by the other items with exception of item (6)
which is the least of them.

Table 3 Chi-square test for goodness of fit showing some solutions to the challenges as well as ways
of realizing the above identified potentials of PX]DUD¶DK contract
S/No Solutions Observed N
1 Enlighten farmers on mX]DUD¶DK partnership package through programs, 54
workshops and seminars
2 Encourage more cultivable land for the farmers by regulating land tenure 55
system
3 Formation of mX]DUD¶DK partners cooperative society 55
4 Financing support to PX]DUD¶DK participants by government and 55
financial institutions
5 The State and other agricultural institutions should design framework 109
and regulation for PX]DUD¶DK as a means to alleviate rural poverty
6 TAKAFUL (Islamic insurance) 36
Total 364
Source: Primary data
Note: P-value=0.00 Degrees of Freedom=5 Level of Significance=0.05 (5%)

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Yahuza BS Viability of 0X]DUD¶DK Contract

Based on the data presented in Table 1 above indicated the potential of PX]DUD¶DK in item (2) as a
means to provide more source to agro-financing, item (3) creates more job opportunities, reduces
unemployment rate, enhances employment, and achieve macroeconomic growth and development,
and; item (5) it enhances food security. In Table 2, it indicated among the five items inadequate
sources of financing agriculture as the major challenge followed by land tenure system. The data also
identified six ways to achieve these potentials in the Table 3, i.e. the need for federal, state and other
agricultural institutions to design policy framework (set of rules and regulations, terms and conditions,
and modus operandi) for PX]DUD¶DK contract as the most important followed by rest with exception of
the sixth which is the least.

Therefore, in accordance with the results of the three tables above, the null hypothesis is rejected
which says that PX]DUD¶DK contract does not have significant potentials in providing agro-financing
and alleviating rural poverty in Kano State, and an alternative is accepted which implies that
PX]DUD¶DK has significant potentials towards providing sources to agro-financing, and alleviating
rural poverty in the study area. However, this is in line with classical theories of PX]DUD¶DK and
empirical studies of al-Harran (1990), Hakimi (2011), Rahman and Othman (2012), Yaacob (2013),
Khasanah et al. (2013) in East Java Indonesia were the farmers practice the profit and loss sharing
(PLS) system on rice farming. The study justifies rice as being the common staple food for almost all
Indonesians. The farmers who own land cannot do the land tenancy by themselves, so they partner
with the sharecroppers. The practice helps in reducing unemployment and increases income earning.
And the theories of rural poverty, rural development, and agricultural financing, such as Makarfi and
Olukosi (2012), Ejike (2012), Ajulor (2013), Egwemi and Odo (2013), Ifeoma and Agwu (2014), and
so on, their studies strongly support the findings of this study.

CONCLUSIONS

0X]DUD¶DK contract is a (sharecropping) partnership on agricultural production whereby two or more

parties agreed to contribute between land, labor and agricultural inputs to share the expected crop
yield on a pre-agreed ratio after harvest. 0X]DUD¶DK is an innovative mechanism that can be used as
source of finance to empower rural farming populations by providing direct access to land from the
surplus landowners to the landless farmers and employ their labor which helps in alleviating rural
poverty in Kano State.

However, the study finds PX]DUD¶DK contract significantly viable in providing alternative source of
agro-financing, creating more job opportunities and reducing unemployment rate by providing more
lands to be cultivated which enhances food security and in turn helps in alleviating rural poverty in
Kano State, given the fact that the State is agrarian with about 75% of its population engaged in
agriculture.

Therefore, the study strongly recommends that governments at all levels, ministries, commissions for
agriculture, and financial institutions through the guidance and regulation of the Central Bank of
Nigeria (CBN) should design and adopt a policy framework on PX]DUD¶DK comprising rules and
regulations on access to land, terms and conditions of the contract, and modus operandi and also laws
concerning disputes resolution for the successful establishment of the contract and alleviation of rural
poverty as proved by the empirical studies.

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